Bahrain Business Forecast Report Q3 2009

Publication Date	July 2009
Publisher	Business Monitor
Product Type	Report
Pages	55
ISBN Number	1750-2179
Product Code	BMI02142

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Summary

As we move towards the second half of what has been a turbulent year economically, things seem to be calming down on a number of levels. Global markets have picked up, with oil prices and equity markets moving higher as confidence returns. The Lebanese elections and Iranian elections have subtly changed the outlook for the whole region as well, and are broadly favourable, in terms of investor perceptions and the likelihood of gradually reduced political risk in the Middle East. However, a number of challenges remain for Bahrain, and we still see negative growth and associated political problems this year.

The boom times are over, and we are now forecasting a 0.1% decline in real GDP in 2009, followed by a sluggish recovery to 1.3% (positive growth) in 2010. The pace will pick up after that, but not to 2004-2008 levels, against a backdrop of a slow and subdued global recovery. However, with oil prices and production gradually rising, the budget and current account returning to surplus and inflation no longer an issue, the economy is looking better placed than most.

Politically, things will remain broadly stable in Bahrain, and we do not see any major challenges to the authority of the King and the government over the forecast period. However, it may get harder to pass legislation, with evidence that the Shi'a opposition al-Wefaq society is looking to play an increasingly active role in policymaking. The society has already influenced the budget, and it is now seeking to delay major new labour legislation and ban alcohol in hotels, restaurants, duty-free shops and aboard Gulf Air, the national airline. How successful they are in this bid will be a test of the Kingdom's democracy.

After a year of sluggish business activity, Bahrain's issue of a US$750mn sovereign sukuk shows that liquidity and confidence situation in the financial sector are picking up. The government was able to issue 50% more paper than it had originally suggested it would, and appetite was strong.

In addition, interbank lending rates have come down, and corporate debt markets seem to have recovered as well. Bahrain's strong financial history and experience will stand it in good stead when confidence returns, and it should continue to attract investment.

Content

Executive Summary
Things Are Looking up
Chapter 1: Political Outlook
- SWOT Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Kuwaiti Style Democracy Ahead?
- The Difficult Economic Conditions Throw up A Number of Challenges for The Government, but Our Core Scenario Is One of Stability.
Chapter 2: Economic Outlook
- SWOT Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Have Diversification Efforts Paid off?
- Although Bahrain's Economic Diversification Efforts Have Been Successful, The Nature of The Current Global Recession Is Such That Lower Oil Prices Are Not The Only Danger, and We Still See A Small Contraction in Real Gdp in 2009.
- Balance of Payments
- 2009 C/A Deficit Will Be Anomaly, Currency Peg Stable
- The External Situation Is Stable, and The Outlook Is Improved in Light of Our Latest Oil Prices Forecasts, but Bahrain Will Still Record A Small Current Account Deficit in 2009.
- Investment Climate
- Financial Conditions: Further Improvement Ahead
- The Success of The Government's Recent Sukuk Issue Is Encouraging, but Investors May Demand A Significant Risk Premium from Any Corporates Looking to Follow The Government's Lead.
Chapter 3: 10-Year Forecast
- The Bahraini Economy to 2018
- Positive Core Scenario, with Risks
- The Longer-Term Outlook Is Broadly Positive beyond 2010, Assuming A Recovery in Oil Prices and Ongoing Political Stability.
Chapter 4: Special Report
- The Outlook for Global Banking
- Business Environment Rating Outlook
Chapter 5: Business Environment
- SWOT Analysis
- Bmi Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Infrastructure
- Market Orientation
- Operational Risk
Chapter 6: Key Sectors
- Autos
- Executive Summary
- The Bahraini Car Market Will Not Escape The Effects of The Global Economic Crisis, with Bmi Highly Sceptical of The Optimistic Outlook Voiced by Some of The Island's Dealerships.
Chapter 7: BMI Global Assumptions
- Global Assumptions
List of Tables
- Table: Political Overview
- Table: Economic Activity
- Table: Balance of Payments
- Table: Long-Term Macroeconomic Forecasts
- Table: Loan-to-Deposit Ratios, Selected States
- Table: Loan Growth (% Chg Y-O-Y), Selected States
- Table: Commercial Banking Business Environment Ratings, Selected States
- Table: Bmi Business and Operational Risk Ratings
- Table: Bmi Lega L Framework Ratings
- Table: Labour Force Quality
- Table: Middle East & Africa Annual Fdi Inflows
- Table: Bmi Trade Ratings
- Table: Top Export Destinations
- Table: Autos Indust Ry Histo Rical Data & Forecasts
- Table: Global Assumptions
- Table: Global & Regional Real Gdp Growth
- Table: Commodities